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Author: Gino Matos, Source: CryptoSlate, Compiled by: Shaw Bitchain Vision
In the second quarter of 2025, the amount of venture capital in the cryptocurrency sector fell by 59% month-on-month to US$1.976 billion, with a total of 378 transactions reached.
According to the Galaxy Digital report, the last quarter was the second smallest investment since the fourth quarter of 2020.
Later transactions account for 52% of total invested capital, the second time that mature companies have received more than startups since the first quarter of 2021.
If the abnormal activity that occurred in the first quarter was taken into account, including MGX’s $2 billion investment in Binance, then this quarterly dramatic decline would not look that serious.
Excluding sovereign-related fund transactions, financing in the second quarter was 29% lower than in the previous quarter.
Although Bitcoin’s price performance was strong for the full year of 2025, venture capital activity in the cryptocurrency sector remained in a downturn compared to the previous bull market, Galaxy Digital’s report shows.
For the first time in years, mining companies have gained the largest share of cryptocurrency venture capital, accounting for more than 20% of the total investment.
Sequoia Capital invested $300 million in cloud mining operator XY Miners, which made the $500 million industry allocation mainly driven by this transaction, reflecting the increasing demand for computing resources due to the development of the artificial intelligence industry.
Regional and phase distribution
U.S. companies remain dominant in the cryptocurrency startup ecosystem, receiving 47.8% of investment and 41.2% of completed transactions.The UK ranks second with 22.9% capital allocation, Japan ranks third with 4.3% and Singapore ranks close behind with 3.6%.
Although regulatory conditions have been very strict in the history of the United States, this phenomenon of regional concentration still exists.
This shift to later investment reflects the growing maturity of the market, and companies supported by venture capital have achieved product-market fit, while traditional established companies have also begun to adopt encryption technology.
As the crypto industry gradually emerges from the experimental stage, the proportion of pre-seed financing transactions continues to decline.Companies established in 2018 received the most money, while companies established in 2024 led in terms of number of transactions.
Market resistance and competition
Crypto Venture Capital Funds are still facing challenges, with 21 funds receiving a total of $1.7 billion in funding last quarter.
Macroeconomic factors, including rising interest rates, continue to curb investors’ extensive investment in venture capital.
Competition from spot Bitcoin exchange-traded funds (ETFs) and digital asset finance companies provides alternative investment exposure for institutional investors seeking to participate in the crypto market.
In addition, the report highlights that the historical correlation between Bitcoin prices and venture capital activity has weakened over the past two years.
Although Bitcoin has risen sharply since January 2023, venture capital investment has failed to reappear in previous cycle patterns.
The weakening of interest in once-popular fields, including gaming, NFT and Web3 applications, has led to a decrease in investor enthusiasm for cryptocurrency venture capital strategies.
The report predicts that activities of U.S. cryptocurrency startups may improve after the government launches new policy initiatives to support cryptocurrencies.
Regulation and market structure legislation around stablecoins may bring traditional financial services companies into the crypto space, which has the potential to increase the demand for venture capital across the ecosystem.
